By Mark Smulian | 17 July 2013
Auditors have qualified the 2011/12 Whole of Government Accounts for the third successive year, this time on six grounds.
The accounts are intended by the Treasury to give a concise overview of government finances and are now in their third year of production.
But National Audit Office head Amyas Morse has said that accounting standards mean the Treasury should have included Network Rail and the publicly-owned banks in the accounts.
However, the Treasury refused on the grounds that the Office of National Statistics does not classify these bodies as public.
Morse also said the accounts were still being produced too slowly despite the Treasury having published the latest set more rapidly than previous ones. He said they should be produced within nine months of year end.
‘If the WGA is to achieve its full potential, the Treasury must do more – such as using accounting standards to decide whether publicly owned and controlled bodies should be included in the accounts,’ he said.
‘By this measure, Network Rail and the publicly-owned banks would be included.’
The main ground for qualification was the disagreement over which bodies should be included.
Qualification also arose from the NAO judging there to be inconsistent application of accounting policies.
The Treasury used the International Financial Reporting Standards adapted for the public sector, but some bodies consolidated in the accounts did not.
This affected those that use the Code of Practice on Local Authority Accounting, ‘pure’ IFRS or UK Generally Accepted Accounting Principles, the Charities Statement of Recommended Practice or the NHS reporting framework.
‘Under accounting standards, the Treasury should identify the impact of the different frameworks and make appropriate adjustments to the WGA, where material, so that the account is prepared consistently in accordance with the relevant financial reporting framework,’ the NAO report said.
It also qualified the way intra-government transactions and balances were treated, pointing out that these could lead to misstatements totalling £21bn.
The NAO also disagreed with treatment of the £22.5bn income from the sale in 2000 of 3G telecommunications licences. This should have been accounted for over its 20-year life, rather than all counted in the 2000/01 year, it said.
Assets owned by schools also led to qualification, largely because of disputes about how land and buildings transferred to academies should be treated.
Qualification arose too where the WGA consolidated the resource accounts of the Ministry of Defence, and the Cabinet Office for the civil service pension scheme, both of which had themselves been earlier qualified.
The NAO also raised concern about ‘uncertainties inherent in estimating the likely costs of the liabilities of the Nuclear Decommissioning Authority’
Public Accounts Committee chair Margaret Hodge said: ‘The WGA for 2011/12 was produced more quickly and contains better information than the previous two attempts, but it still has a long way to go before it is genuinely useful for my committee and government more widely.
‘The data is not yet good enough to give a complete and detailed picture of government’s financial position. I fail to see what justification there can be for bodies such as Network Rail and the publically-owned banks to remain outside the WGA’.
A Treasury spokeswoman said it intended to include Northern Rock and Bradford & Bingley in next year’s WGA as their classification had changed.
‘The accounts are a major step forward in transparency and have been produced quicker than last year so we have made progress,’ she added.
CIPFA chief executive Steve Freer said: 'CIPFA is very supportive of the Whole of Government Accounts initiative and is encouraged that each successive publication of the accounts reflects further progress.'
But added that CIPFA would like to see more 'rapid development' of the project.
'For the immediate future the three key targets should be fewer audit qualifications, earlier publication after the year end, and more frequent use of the information contained in the accounts by policy makers and in debates around policy options,' said Freer.
'With a general election not far away, WGA has the potential to be a very important source of audited information about the UK public finances.'
